Gaming spending outpacing all other entertainment, analyst says
Deutsche Bank analyst Carlo Santarelli, in a Tuesday report, said people are spending more on casinos, lottery and horse racing than concerts, movies and sports.
A Wall Street analyst says the gaming industry is outpacing every other form of entertainment spending, including amusement parks, movie theaters, concerts and live spectator sports as the economy bounces back.
Carlo Santarelli, New York-based analyst for Deutsche Bank, told investors in a report issued Tuesday that the biggest question facing the industry is how long the pace can be sustained.
In 2019, $142 billion was spent through gambling related channels, Santarelli wrote. Of this, $109 billion, or about 77 percent, was spent on casino gaming. After gaming comps turned positive, relative to 2019, in March of 2021, growth in the segment has accelerated, with each of the subsequent months experiencing double-digit increases, relative to the corresponding months in 2019.
Santarelli said hell be watching the trends carefully to see if gaming, which includes casinos, lotteries and horse racing, can maintain its growth pace.
Despite the growth in spend in both gaming and dining, aggregate recreational spend, including gaming and dining, only turned positive in May, when compared to 2019, while recreational spend excluding gaming and dining has remained down over 20 percent in each month in 2021, when compared to 2019, Santarelli said in his analysis.
As such, while broader recreational spend is growing and is likely to continue to grow, the mix shift to gaming has certainly served as a tail wind for increased customer spend in casinos, specifically, he said.
Santarellis analysis included comparisons of third-quarter gaming revenue in 2020 compared with the third quarter of 2019, the fourth quarter of 2020 compared with the fourth quarter of 2019, and a comparison of the first and second quarters of 2021 against the first and second quarters of 2019.
Over the second quarter of 2021 and in July of 2021, we estimate that the share of recreational spend that gaming has taken from other recreational sectors, amounts to about $18 billion of incremental revenue, on an annual basis, across the gaming channels, of which, casinos make up about 77 percent, Santarelli said.
Accordingly, while year-over-year comparisons will stiffen as we move into 2022, we think, in the coming months, one dynamic that will be interesting to watch will be the relative performance of gaming, versus other recreational spend channels, most notably those that have been and continue to be materially off 2019 levels.
Gaming industry growth has been well documented in the Silver State with the Nevada Gaming Control Board reporting that the states casinos collected $1.36 billion from players in July,
That month was the fifth consecutive month gaming win had surpassed $1 billion.
July was a perfect storm for gaming win in terms of special events, the month having five weekends, Resorts Worlds first full month of operations and a very unusual baccarat month with high hold and increased play from international guests, Michael Lawton, senior research analyst for the administration division of the Control Board, said in August when the gaming win was reported.
The Gaming Control Board is expected to report August gaming win next week.
In July, spend on gaming was up 15.6 percent (nationwide) versus July of 2019, while casino spend was up 17.8 percent versus July of 2019, Santarelli said in his report. In total, gaming spend accounted for 11.3 percent of total recreational spend, up 130 basis points from the 10 percent of spend the segment accounted for in July of 2019.
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What s driving the global glut of oil
A year ago, crude oil was trading at more than $100 a barrel. Now, the price of oil is down more than 60 percent from its peak. Gwen Ifill speaks to The Wall Street Journal s Russell Gold to understand the drop and how it affects the U.S. economy.
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GWEN IFILL:
Only a year ago, crude oil was trading at more than $100 a barrel. But prices have plunged, down more than 60 percent from its peak. Much of that drop has occurred in just the past few weeks.
Increased supply and declining demand for oil, plus the ongoing slowdown in China's economy are part of what's been fueling turmoil in the financial markets, and for some of the major oil-producing countries as well.
Russell Gold covers this as the senior energy reporter for The Wall Street Journal.
Thank you, Russell, for joining us.
The price of crude oil, as we just said, is down so much since 2014. What's the basic reason?
RUSSELL GOLD, The Wall Street Journal:
Well, the basic reason is that the supply continues to grow.
The United States, which has sort of been the big story over the last few years, has been pumping more and more oil. It's barely flattening off, even as prices come down. Everyone thought the U.S. production would fall off a cliff and that hasn't happened. Meanwhile, Saudi Arabia has been increasing production, something you wouldn't expect from them at these oil prices.
And everyone thought, well, what will save the day is Chinese demand, growing Chinese demand will sop up all that extra oil. That hasn't happened. And then over the last week, as we have seen, there are a lot of questions about whether there is going to be any Chinese demand over the next year or so.
GWEN IFILL:
Why hasn't there been any incentive to cut back in production as a way of driving the price back up?
RUSSELL GOLD:
Well, there's been a lot of incentive if you sort of look at the big macro level across the entire industry. But if you're a producing country, there is no incentive to cut back, because what you're doing is, you're waiting to hope that somebody else cuts back first.
If you are the one who cuts back, well, that's going to dry up your revenue. And if you're a company, then you're not going to be able to pay your workers. And if you're a country, you're not going to be able to fund social programs.
GWEN IFILL:
Where is all this oil coming from, especially in the U.S.?
RUSSELL GOLD:
Well, in the U.S., there has been an incredible boom brought about by fracking. It's mostly coming from Texas and North Dakota.
We're producing more oil than we have since the early 1970s. It's been a really just remarkable turnaround.
GWEN IFILL:
And as a result of this these low prices, what's happened to consumption? Are Americans saying, well, prices are low, I will just keep going as I go? Or are they doing what Americans do, which is buying more?
RUSSELL GOLD:
Well, that's a great question.
Back in 2007, there was what some analysts call peak gasoline consumption in the United States, we'd hit the maximum that we were going to hit because the cars were getting more fuel-efficient. Well, that's starting to actually turn around. People are buying less fuel-efficient cars and they're driving further.
So, you know, you're out there, you're seeing the $2.50 gasoline prices in a lot of places in the country and people are beginning to drive more. So, demand in the U.S. is going up. Globally, it's flat.
GWEN IFILL:
And so the USA, they're buying big trucks, for instance?
RUSSELL GOLD:
We're starting to see that coming back, yes, absolutely.
GWEN IFILL:
So, let's talk about those other countries. You mentioned Saudi Arabia. But what about oil production in places like Iraq, or Venezuela, Nigeria, Russia?
RUSSELL GOLD:
Well, Iraq is also like Saudi Arabia, has really ramped up its oil exports.
They're sort of part of the reason behind this glut. But if you look at a place like Venezuela, they have got triple-digit inflation rate now. The IMF sees the economy contracting by 7 percent. They're sort of right now at the leading edge of oil-producing countries that are in a lot of trouble economically. Russia also is having trouble. They're believed to be in a recession right now because of low oil prices.
When you're a producing nation and that's your primary economic output in a place like Venezuela or Nigeria, this is just a really bad scenario for them.
GWEN IFILL:
OK. Well, let's go back to China. We have watched this incredible turmoil in the Chinese markets. Which is the chicken and which is the egg, or does oil play a role in this at all? Is oil driving any of this, or are the markets driving the oil prices?
RUSSELL GOLD:
Well, I think right now it seems to me like the markets are driving the oil prices.
When you see the Chinese economy begin to really slow down or at least the signals are very clear now that it's slowing down, then, all of a sudden, you don't have the big growth in demand that, up until a couple of weeks ago, everyone was expecting. The International Energy Agency earlier this month put out their big monthly report saying, we're going to see a lot of growth in demand at the end of this year.
Well, that's really a question mark now. And if you're a producing company now, just a couple let's say two months ago, the Kansas City board of Kansas City Federal Reserve Bank put out a survey and asked producers, well, what do you think the oil price is going to be at the end of the year? And the answer was $63. I think they are going to be ecstatic if they get to $63 by the end of the year.
GWEN IFILL:
And, finally, let's talk about little bit. We talk a great deal on this program about the Iran nuclear deal. And of course there is oil involved and there are questions about oil production involved in that as well. Does that change the nervousness about that deal at all? Does this have an effect?
RUSSELL GOLD:
Well, I think what the impact it could have is that, if the deal goes through, that's just one more weight on oil prices, because Iran wants to come back and double their production, add another million barrels a day of export on to the market.
So if you're sort of looking long-term and thinking to yourself, well, when do oil prices rebound, if the Iran deal goes through, then that's just one more bearish sign really for oil prices.
GWEN IFILL:
OK. Well, we will be watching all of these. There's so many factors which will drive the outcome.
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